Patrick Hylton | Economic outlook for 2021 and beyond: When can we expect recovery and how to accelerate it?

Even as sentiment globally has become more positive over recent weeks with more respondents seeing better than worse economic conditions in six months, the path to global economic recovery is uncertain – recent surveys of global executives show that most believe it will take until 2022 Q3 or even 2023 Q3 for a full recovery of global GDP.

The tourism slowdown will likely impact the pace of recovery in Jamaica. In a spiral effect, the pandemic has reduced both the demand from travellers and the supply from institutions (given travel restrictions and closures). As a recent survey on leisure travellers indicates, only around 60 per cent showed interest in travelling, the same amount post-COVID versus pre-COVID, meaning it may take time for consumers to feel safe travelling again.

Table 1 exhibits the economic recovery scenarios.

Uncertainty surrounding the latest vaccine developments and herd immunity evolution (possible by spring to late 2021, depending on vaccine efficacy and coverage), as well as lack of clarity around the economic reaction to unprecedented government stimulus packages, leave a lot of question marks related to the speed of the potential economic recovery in the post-COVID period. In Jamaica, a lot will depend on the results of the upcoming tourism season in the first quarter of 2021 – which could provide further clarity on the anticipated speed of recovery and growth prospects in the long term.

Having summarised these implications and the outlook for 2021, one can ask, what lessons Jamaicans can take from global examples? Emerging changes resulting from COVID-19 could create an appealing platform to drive further economic reforms in Jamaica that can help it become more competitive on the regional and global scales. Balancing health considerations (lives) with economic considerations (livelihoods, especially in tourism with the upcoming peak season) is a critical task that has to be effectively addressed. In addition, acknowledgement and acceptance of new digital trends are critical to staying competitive in the global and regional context. Considering the acceleration of specific consumption trends and observation of key economic challenges in the past, I have identified five strategic themes to consider to drive an accelerated recovery path:

STRATEGIC THEMES

Strategic Theme #1: Accelerate digital transformation through investment in infrastructure and ensuring access to everyone. Our economy has seen the emergence of digital initiatives for several years, but they have been significantly accelerated with the evolution of the COVID-19 pandemic, which has rapidly shifted consumer habits. There is a clear consensus that economies won’t return to pre-COVID, non-digital models; instead, we are likely to ride the wave of further digitisation.

In light of that, it will be important to further invest in availability (e.g., infrastructure) and accessibility of digital services, including addressing the digital divide in information and communications technology between urban and rural areas with tailored policies and alternative supply models. The introduction of simple and widespread solutions at-scale to local citizens and businesses (e.g., mobile P2P payments, a national identification system, e-Commerce, etc.), will allow easier and faster access to information and services, as a result driving up productivity, and reducing inequality. The GOJ has indicated that the development of this infrastructure will be one of its highest priorities.

Strategic Theme #2: Increase financial inclusion and accessibility to drive more opportunities for individuals and businesses. Many countries globally (including Jamaica) have faced challenges with the identification and distribution of targeted stimulus packages to the most affected individuals due to their limited inclusion in the formal financial ecosystem. Accessibility and openness of the financial system to every Jamaican will be critical to unlocking the next phase of economic growth – as it will allow easier access to government support, more opportunities to finance emerging business opportunities or consumption requirements, and greater awareness of building up investments and savings to ensure resilience for the next potential crises.

Strategic Theme #3: Invest more in local talent build-up and proactive reskilling of the workforce to create more employment opportunities and improve labour productivity. COVID-19 has changed the landscape for the overall workforce resulting in a short-term unemployment spike, as well as long-term changes in the type of skill set required for specific job positions. In addition, enforcement of strict lockdown measures to contain the spread of the virus has also brought adverse effects on labour productivity in the short term. Inadequate infrastructure and insufficient preparation of remote work models resulted in significantly lower productivity.

Long-term investment in building up strong local talent pools through targeted education programmes and focused at-scale efforts to reskill the existing workforce to better fit the requirements of the future could make Jamaica more competitive on a regional and global scale – thus attracting more foreign investments and creating additional job opportunities. This will also drive improvements in labour productivity, which can be further accelerated by investment in capabilities and infrastructure to support remote work, which will be mission-critical to build resilience in case of a prolonged pandemic or emergence of another crisis later down the road.

Strategic Theme #4: Launch a targeted effort to reimagine the local tourism industry and emerge even more competitive post-crisis. Sudden border lockdowns and imminent travel restrictions have brought challenges to the tourism industry. Being one of the economies with the highest exposure to tourism, Jamaica is severely affected by global and regional trends in tourism – particularly by the reopening timelines of critical air routes that connect it with potential visitors. A smart and agile approach to reinvent tourism will be required, as Jamaica prepares for the upcoming peak season at the end of 2020.

Various countries are using different methods – from enabling ‘working visas’ for digital nomads to attract long-term visitors with high purchasing power (e.g., Barbados, Estonia, Croatia) to attracting at-scale tourists by positioning themselves as a COVID-19-free zone, having invested in support infrastructure to rapidly and reliably detect and contain virus spread. Jamaica has taken the initiative with the establishment of the resilient corridor among a myriad of other initiatives to breathe new life into the industry and to prepare for the new normal.

Strategic Theme #5: Enable significant growth of micro, small and medium-sized businesses on the back of improving the ease of doing business. Micro, small and medium-sized enterprises are critical for the local economy. More than 30 per cent of employment comes from sole proprietors, indicating the significant importance of this business segment for the overall economy. At the same time, these businesses are most exposed to crisis-induced uncertainty and short-term pressure. Governments have made determined moves to support them – based on global research, more than 90 per cent of countries have released SME-focused measures. The Jamaican Government has followed suit with significant support packages.

There could be an opportunity, beyond the short-term measures, to transform the business landscape for SMEs – by simplifying the regulatory context, creating additional access to financing, and building up supporting talent and infrastructure to drive sustained growth of micro, small and medium-sized enterprises. This could be particularly relevant with a view to the development of the high-tech and digital sector.

To conclude, the COVID-19 crisis is a major challenge for global economies and society – it has brought a sudden and unexpected change in our daily lives. It has made a significant impact on the health outlook (with more than 45.5 million confirmed case globally) and introduced challenges on the macroeconomic front. Jamaica has not been spared from these effects.

At the same time, this crisis also creates an opportunity to conduct a thorough transformation of the local economy. This is particularly important given the cyclicality of macroeconomic events – building a resilient and strong economy now, which can be competitive regionally and globally, is critical for long-term sustainability and stability of the economic outlook. Now is the time to take action and jointly drive change to ensure a better future.

- Patrick Hylton is NCB Financial Group president and CEO, and chairman of the board of National Commercial Bank Jamaica. Send feedback to columns@gleanerjm.com.